Three items in this quick article: 1. Brisket Inflation. 2. Social Security “Pay Raises” 3. Omaha, Ne Social Security Workshop in October
Hello retirees/future retirees. First, the bad news.
The bad news is, almost everything is more expensive than what it used to be. For example, my smoked briskets are a lot more expensive than what they used to be! If you know me, you know that I love to smoke food on my RecTeq. And if you know me, you know that as a corn-fed Southwest Iowa guy, I like to eat! And if you know that I have an 11 year-old son and a 14 year-old son, you know that my grocery bills are massive!!! My desire for food nowadays is unfortunate because of the price increases that we have experienced. Beef brisket was over $4.50 a pound at a grocery store I was at last night!
It is not just those that eat food (which is most of us) that should be concerned about inflation, because the prices of almost everything else have increased. If you have been anywhere at all – Walmart, car dealers, grocery stores, etc. – you know that it does not take an economist to tell you that prices have gone up. Check out the below graph that I pulled off the US Bureau of Labor Statistics website that is a common benchmark for inflation. This is a simplified chart of the “CPU-U” index. I simplified the actual chart down to two columns. One column shows the categories that you spend your money on and the other column is the percentage increase/decrease from June of last year to June of this year. These percentage increase numbers are the largest that we have experienced in recent history.
For example, I will soon be buying a car for my 14-year-old. You can imagine I almost spit out my coffee as I read what the percentage increase was over the last year for “Used Cars and Trucks”. Over 45%!!!
Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by expenditure category
|Expenditure Category||June 2020 – June 2021|
|Food at home||0.9|
|Cereals and bakery products||0.2|
|Meats, poultry, fish, and eggs||0.7|
|Dairy and related products||0.8|
|Fruits and vegetables||3.2|
|Nonalcoholic beverages and beverage materials||0.2|
|Other food at home||0.4|
|Food Away From Home||4.2|
|Gasoline (all types)||45.1|
|Utility (piped) gas service||15.6|
|All items less food and energy||4.5|
|Commodities less food and energy commodities||8.7|
|Used cars and trucks||45.2|
|Medical Care Commodities||-2.2|
|Tobacco and Smoking Products||7|
|Services less energy services||3.1|
|Rent of primary residence||1.9|
|Owners Equivalent Rent of Residences||2.3|
|Medical care services||1|
|Motor Vehicle Maintenance and Repair||3.1|
|Motor vehicle insurance||11.3|
Many pundits will say that this inflation is “transitory” – which is a fancy ivory tower way of saying temporary. Note: As somebody with a finance degree, Two securities licenses, a financial columnist, two financial designations, and a lifetime of studying finance and economics, even I get disgusted with the financial Ivory Tower “lingo” that nobody understands!. Anyway, I digress.
Many believe that these price increases are temporary because of what the bond market is doing. They say that the low interest rates in the bond market is an indicator of low inflation expectations. My response to those pundits that are saying this is, the bond market is heavily manipulated right now with “asset purchases” by the US Treasury and therefore is not as reliable of an inflation indicator as what it used to be. This will be a topic that I will cover in future articles, along with an article on Bitcoin!
Many pundits also believe these price increase numbers are overhyped because of the “base effect” of comparing the current prices on these items to the depressed prices that we “supposedly” experienced last year during the height of the COVID Crisis. I don’t know about you but I never really witnessed prices decreasing on anything once the Covid crisis happened. For example, remember how toilet paper became a hot commodity???
Now, to the good news – Social Security Increases!!! It is estimated that the “Cost of Living Adjustment” for Social Security benefits for 2022 could be around 6.1%, the highest since 1983. This is because Social Security pegs the increases to the chart I referenced above. The actual-official announcement of what the COLA increase will be usually happens in October. NOTE: We are also hosting a “Virtual Seminar” on Social Security on October 7th. CLICK HERE for additional details and to register.